OEV
HD28
.M414
ALFRED
P.
WORKING PAPER
SLOAN SCHOOL OF MANAGEMENT
DISPUTE RESOLUTION AND THE
TRANSFORMATION OF U.S. INDUSTRIAL RELATIONS
A NEGOTIATIONS PERSPECTIVE
Joel Cutcher-Gershenfeld
Robert McKersie
Richard Walton
August 1989
WP# 3056-89-BPS
MASSACHUSETTS
INSTITUTE OF TECHNOLOGY
50 MEMORIAL DRIVE
CAMBRIDGE, MASSACHUSETTS 02139
DISPUTE RESOLUTION AND THE
TRANSFORMATION OF U.S. INDUSTRIAL RELATIONS:
A NEGOTIATIONS PERSPECTIVE
Joel Cutcher-Gershenfeld
Robert McKersie
Richard Walton
August 1989
WP# 3056-89-BPS
AUG
1
8 1989
Qcnauax
;
I
RESOLUTION AND THE
DlSPl'TE
TRANSFORMATION OF
U.S.
INDl'STRIAL RELATIONS:
A NEGOTIATIONS PERSPECTIVE^
by Joel Cutcher-Gershenfeld, Robert McKersie, and Richard Walton'
INTRODUCTION:
Virtually every industry in the United States
changes
own
in industrial relations
is
grappling with fundamental
and organizational arrangements. In the course of our
research tracing these changes (Kochan, Katz and McKersie, 1986; Walton, 1988;
Cutcher-Gershenfeld, 1988),
it
has become clear that the degree and nature of change
varies greatly across industries, within a single industry, and even within a single firm.
As
well,
upon
close examination, the variation can be understood as the product of a
highly negotiated set of interactions
among stakeholders
to the
employment
relationship.
This paper
is
a progress report
on current research aimed
understanding of the current variation
underway
been selected
processes.
As
in three industries
to represent a
well,
number of other
we
are
—
deepening
in industrial relations practice via the
examination of negotiations processes. In
are
at
this research
we have examined changes
paper, railroads, and auto supply
that
— which have
range of competitive pressures and a range of production
drawing on our own prior research on current changes
in a
industries, including shipping, automobile manufacturing, airlines.
^ These remarks represent preliminary findings from
a larger study on the negotiations
processes associated with fundamental change in industrial relations. The study is being
conducted by Robert McKersie, Richard Walton and Joel Cutcher-Gershenfeld with support
from the W.E. Upjohn Foundation for Employment Research. Research assistance on the
project has been provided by Kathleen Scharf and Patrick McHugh.
^ Names listed in alphabetical order. The authors are on the faculties of Michigan State
University, the Massachusetts Institute of Technology, and Harvard University, respectively.
1
and electronic office products. The paper
section traces changes
is
and strategic options
divided into two main sections; the
and the second section
in three industries
examines the implications for theory and practice. At the outset, however,
important
to note that the material reported here
is
first
highly preliminary
it is
— we
are
presenting our current thinking at this stage of the research, rather than any final
conclusions.
PART
NEW PATTERNS
1:
IN
LABOR-MANAGEMENT NEGOTIATIONS
observe two dominant avenues by which labor and management have engaged
We
in negotiations that
have led
to
fundamental changes
in industrial relations.
The
first
avenue involves urgent pressure — typically from management — for changes that are
seen as essential for organizational survival.
bargaining" to characterize the
set
We
will be using the term "necessity
of interactions associated with such pressure.
The
second avenue emerges out the broad range of activities that labor and management
leaders
may
agree to jointly establish and administer, including training, employee
involvement, health and safety, new technology, employee assistance programs, job
security, absenteeism, health care,
and strategic planning. We
will be using the term
"administrative bargaining" to characterize the set of interactions associated with these
joint initiatives.
In order to illustrate the concepts of necessity bargaining
administrative bargaining, as well as to place them in context,
we
and
will begin with an
examination of three highly contrasting U.S. industries.
Throughout the analysis
Table
1,
in this section of the paper,
we
will
which examines management's short-run and long-run
in three industries.
responses.
These
abilities are then linked in the
As the format of the table implies,
management
that
is
the point of departure for
Insert Table
it
is
ability to impose
to
to
change
bargaining
the strategic choices facing
much
1
Table
make reference
of the analysis presented here.
Here
The Paper Industry
The industry has been heavily unionized by one dominant union,
Paper Workers, and remains heavily unionized. The primary approach
the past several years has been via
lowering labor
bargaining as
costs.
major holidays),
to
the elimination of
industry,
to
change over
what we would term necessity bargaining, aimed
In this context,
demands
it
the United
management becomes
to eliminate "cold days"
at
the driving force in
(when the
mills are shut
down
for
reduce Sunday premium pay, and to develop more flexibility via
work
rules.
many companies
While imports have not been a major factor in this
find their overall rates of return to be unsatisfactory and
they realize that their compensation costs are typically far above market rates for the
(mostly rural) communities within which their facilities are located.
The strong
desire on the part of the companies to lower labor costs has
substantial resistance on the part of the workers involved.
out strikes have occurred at mills
The strong
resistance
the industry
persuasive.
is
is
For example, long, drawn-
owned by Boise-Cascade and International Paper.
explained primarily by the fact that the financial pressure on
not so severe as to
make
the
demands of
the
company compellingly
Walton (1988) notes that economic pressure needs
capture the attention of the workforce, but not so severe as to
seem
is
fruitless.
met
to be severe
enough
to
make any adaptation
Thus, we would conclude that economic pressure in the paper industry
on the low side of what would be considered a motivating level of economic
Another factor that fosters full-fledged confrontation
unilateral implementation of changes in
work
practices.
is
stress.
the employer strategy of
Paper companies seem
to
have
perfected the techniques of operating plants with supervisors, hiring replacements and
instituting changes with the
and auto supply — where
crew),
it
new workforce. Unlike our other two
it is
very difficult to attain full production with a skeletal
has been feasible in paper (and other continuous-process industries) for
management
to operate the facilities for a sustained period of time.
reason that management's ability to impose short-term change
"high."
industries (railroads
is
It is
for this
classified in Table
1
as
Thus,
in the short-run, a
open conflict. Interestingly,
number
of relationships have deteriorated to the point of
in this contentious context,
been quietly pursing change on
a
more cooperative
basis.
some paper companies have
In effect, they offer the
union an alternative of seeking change more gradually and quietly, without the
breakdown
in
labor-management
relations.
This quieter, more cooperative path
not
is
characterized by the same urgency and depth of change in contractual issues as
necessity bargaining, but nor has
administrative bargaining.
An
it
lead to extensive change via joint governance
interesting long-run set of questions
is
and
whether the
quieter approach will evolve into broader administrative bargaining and whether the
approach
direct, necessity bargaining
the quieter,
to
change
will lead to different
outcomes than
more cooperative approach.
Over time, there
necessity bargaining.
is
some evidence on the long-term dynamics associated with the
While the confrontations associated with necessity bargaining are
certainly significant emotional events, there are indications that the contention
somewhat
least
is
at
For example, after a bitter strike at the Rumford Mill of
reversible.
Boise Cascade, the parties have recently opened negotiations early and signed a long-
term agreement that appears
to
meet the parties' mutual objectives.
While there are some nonunion mills that have been opened in new locations, the
more typical pattern seems
expansion and upgrading of existing facilities
to be the
(where unions are very much
a part of the scene).
strategy of opening up a nonunion greenfield mill
due
to the
high fixed capital
costs.
ability to avoid the union in Table
This
1
is
We
relationship
are not
now
is
as "low."
in a position to
contrasting alternatives that
quieter,
from
the inability of
is
that the
not easily available to the parties
why we have
classified the long-term
Thus, from an analytical point of view,
an important determinant of the apparent need
management
The evidence suggests
to
improve the long-run labor-
management
to
move
its facilities.
provide any definitive evaluation of the
we observe
in the
paper industry.
On
the one hand, the
more cooperative approach produces change, but slowly. The long-term
this
approach could be substantial, but there
is
not yet evidence regarding
results
whether the potential
will be realized.
On
the other hand,
clear that the necessity
is
it
bargaining approach leads to significant changes in the short run, but usually at a very
high cost
to
morale and the quality of the labor-management relationship. Over the
long run, there
is
some evidence that some degree of reconciliation
the paper industry seems broadly divided between two
dynamics
is
--
Thus,
possible.
one that involved
escalating, highly contentious necessity bargaining followed by reconciliation;
and the
other that involves quiet, cooperative initiatives that expand in scope at a slow pace.
The Railroad Industry
By many measures, the railroad industry has undergone substantial change over
Employment has dropped
the past ten to fifteen years.
lines
have been sold
to
in half
and
a
number
independent operators, often with dramatic changes
of branch
in
contractual arrangements. However, by comparison with other industries where
significant changes have occurred in compensation arrangements and
work
rules, the
core features of collective bargaining arrangements in this industry have primarily
remained
intact.
Hence, short and long-term dimensions of Table
1
for the railroad
industries are labeled as "status quo."
The
factors.
industry.
status
First,
quo nature of the industry
with respect
to
run
is
economic necessity, the picture
The major companies
making
are
would be considered an acceptable
workers are
in the short
profits,
rate of return.
in a position to resist a
explained by several
is
similar to the paper
although they are far below what
Secondly, the unions and the
lowering of their compensation (which
is
the
highest of any industry) due to the unions' ability to engage in secondary boycotts
(under the Railway Labor Act) and the willingness of the unions to do so (that
solidarity of the unions).
is,
the
With the exception of the experience of the Florida East
Coast Railway (that sought to operate trains in the face of a strike several decades
back), none of the large railroads have contemplated full scale necessity bargaining.
One
railroad, Guilford,
is
a small regional carrier that did recently continue to
operate in the face of a strike (until
it
was ordered
to rehire
workers via an emergency
board and several arbitration decisions).
It is
interesting to note that now, Guilford
has followed the route of several of the paper companies wherein the confrontation
has been followed by reconciliation. Guilford has signed an encompassing contract
with the United Transportation Union for
form of union representation
airlines
and railroads
is
is
all
of the craft workers. This industrial
preferred by management
—
common complaint
a
that they do not have the advantages of one union as
is
in
found
in the trucking industry.
Returning
is
to the short-run status
quo characterization of the railroad industry,
it
important to note that a range of approaches have developed as the companies have
sought to achieve breakthroughs in manning levels and work rules.
very ambitious problem-solving exercise with
all
CSX
engaged
in a
of the unions and an imaginative
package resulted that provided for substantial reductions of the workforce via early
retirements and attrition, as well as a sharing of future benefits with the workers.
However, the unions have not been able
there
is
no support for the union leaders
to sell the
to
engage
package
to their
in the full
members. Thus,
range of ongoing,
administrative negotiations that would be required to give life to the dramatic changes.
Over the long run, the railroads are very much locked
to their relationships
into their route systems
with the unions that are "on the property." The term we hear
frequently mentioned by railroad management
seeking to develop "leverage" as a
way
is
that one
way
or another they are
of compelling changes in operations.
of major carriers have sought to break out pieces of the business
parties or to place
and
them under subsidiaries
that
and
sell
them
would enable management
restructure operations and to renegotiate labor agreements.
Some
A number
to third
to
of these efforts have
been successful, but others have been effectively stopped by injunctions that unions
have obtained from the courts. We believe much more of
this testing of the limits will
take place, given the pressures for change and the difficulty of conventional collective
bargaining
the
in
bringing about what management sees as the necessary adaptation. For
moment, however, the railroad industry seems
to
have neither the impetus for
necessity bargaining, nor the foundation for administrative bargaining.
The Auto Supply Industry
This industry presents
a
very interesting profile of a rapid decline in union
density over the past ten to fifteen years. Yet, at the same time, there has been the
emergence
few remaining unionized
in the
facilities of a
number of far-reaching
problem-solving efforts to improve effectiveness and job security.
In the short run,
industry.
The union
change has proven difficult for management
is
to
achieve in this
very good position to resist concessions because
in a
it is
more
difficult to maintain production and deliveries during a strike (in contrast yvith the
paper industry); there are often other firms ready to take over unfilled orders; and
customers are pressuring firms
inventories.
to operate
on just-in-time delivery basis
Hence, the short-term potential for change has been labeled
"low" and the resulting pattern
Faced with
a
is
in
Table
"status quo."
many companies have avoided
long-term strategy of shutting unionized plants
Companies such
as Eaton,
TRW
protracted discussion and pursued a
down and opening new, nonunion
and Dana, for example, have experienced
precipitous drop in the percentage of their blue collar workers that are unionized.
key element of the strategy of such firms
management techniques aimed
(assessing
worker
is
at filling the
the use of all of the latest
human
priorities, dispute resolution,
high percentage of operating
doubt,
a
A
resource
functions normally assumed by a union
and sharing information). Motivating
such moves are considerable economic pressures and labor costs that are
No
as
1
perceived need for change and with initial resistance from the
unions and workers,
facilities.
reduced
yvith
a relatively
costs.
many companies have taken
the escape option prematurely.
It
takes
time to convince a workforce about the economic realities; sometimes two or three
rounds of "education" and ratification votes are taken before
members
will accept substantial
arrangements.
And
there
is
a
majority of union
changes in contractual work rules and compensation
evidence to suggest that
many workers can come
to accept
the necessity of change in order to meet competitive pressures.
Where companies have been more patient, we find
a
dramatic emergence of
administrative bargaining. For example, in the Budd Detroit Stamping Plant, which
organized by the
decline) that
is
UAW,
is
there has recently been a period of growth (after a long
partly fueled by a range of successful administrative initiatives.
These
include a revitalized employee involvement program, the use of an autonomous team
structure to
manage
the stamping die transition process, the extension of the team
concept to quality issues, and the potential use of team structures for
operations. Sustaining these
new arrangements has required
a
all
production
more continuous form of
administrative bargaining between line production managers and union leaders. As
well, since there are parallel
industrial relations staff
developments
in other
Budd
plants, the corporate
and the international union leadership have found
it
necessary to bring together the key members of both bargaining teams on a quarterly
basis throughout the term of the current contract.
management
(UAW) and
leaders a major parts supply plant in the Rochester Products Division of
General Motors have found
morning)
Similarly, the top union
in order to
it
necessary to meet on a weekly basis (every
Monday
administer an extensive employment security program.
Thus, in the auto supply industry, the short-term picture has been constrained for
many
parties, while the long-term picture features
two divergent extremes. On the one
hand, contentious relations go beyond necessity bargaining to the elimination of the
collective bargaining relationship.
On
the other hand, far-ranging administrative
bargaining has been associated with fundamental transformation in industrial
relations.
PART
II:
IMPLICATIONS FOR THEORY AND PRACTICE
Necessity bargaining and administrative bargaining both involve negotiations
over issues of fundamental change, which are outside the traditional agenda that
parties usually bring to the collective bargaining table.
However, necessity and
administrative bargaining represent very different paths toward these issues. In this
section of the paper,
different paths.
we
will surface the implications for theory
and practice of the
Implications for Practitioners:
Necessity Bargaining
As we have suggested above, managers
number of
in a
industries are
what they
the bargaining table with positions that are rooted in
see as
coming
to
economic
which we have termed "necessity bargaining." The managers are often
necessity,
become
surprised, however, to find that bargaining over such matters does not
a joint
problem-solving process over how best to respond to competitive pressures. Instead, the
negotiations can deteriorate into a highly contentious proceeding.
deterioration occur around issues ranging from
number of job
One key
premium pay on weekends
seen this
to the
classifications.
factor in the deterioration of necessity bargaining into a low-trust, high
conflict set of relations
is
the failure of both labor and
management
there are more than the obvious substantive issues on the table.
management demand
for reduced classifications
management preference
traditional
We have
may
for flexibility
—
reflect
it
may
to
recognize that
For example, a
more than
just a
be seen by managers as an
indispensable component of their competitive survival as a firm. For labor, the
demand
for reduced classifications
previously
won
may
be seen not only as an encroachment on
benefits, but as a threat to the very institutional security of the union.
Thus, for both parties, there are survival issues at stake that go well beyond the
specifics of
work
rule changes.
Recognizing the existence and the legitimacy of these deeper survival issues
is
a
key step toward avoiding the deterioration of necessity bargaining. At an interactive
level, recognition
and checking
to
may
take the form of each side being explicit about what
ensure that
it
understands what
is
is
at stake
at stake for the other side.
At an
institutional level, the existence of
forums oriented toward problem-solving bargaining
(joint committees, task forces, etc.)
can play a
It is
what
is
critical,
complementary
role.
important to note an interactive dilemma associated with being explicit about
at stake for
each
side.
This involves the risk that the acknowledgement of the
other side's deeper interests not be construed as agreement with the other side's
A
position.
related issue associated with necessity bargaining concerns distinguishing
crisis pressures
what
is
from
at stake,
it
Even
rhetoric.
may
if
one side or the other
not sound appreciably different
tries to
from
past
be explicit about
management
rhetoric about competitive pressures or past union rhetoric about institutional security.
Typically, fundamentally deeper levels of information sharing are a necessary
requirement
order to distinguish present realities from past rhetoric.
in
Finally, the clear implication
from the analysis
in Section
I
on short-term and
long-term options suggests that the use of necessity bargaining in the short-term be
linked to a realistic evaluation of long-term options. Thus,
have long-term flexibility,
management
is
some form of reconciliation. This
will eventually have to be followed by
to suggest that the
unfreezing quality of
is
a
ill-advised.
this point
is,
There
is
some
hard short-term strategy
some important managerial gains without irreparable damage
The evidence on
paper mill does not
predicable that even the most hard-edged strategy by
not to say that a hard-edged short-term strategy
evidence
to
it is
if a
may
lead
to the relationship.
however, incomplete.
Implications for Practitioners: Administrative Bargaining
For many practitioners, the bargaining associated with
many new employment
issues contrasts strongly with the bilateral, periodic set of adversarial interactions that
typically characterize collective bargaining.
found with respect
and safety,
to
to issues
New
patterns of negotiations can be
ranging from training,
new technology,
to
to
employee involvement,
employee assistance programs,
to health
to job security, to
absenteeism, to health care, to strategic planning. Setting aside current debates over
whether bargaining over wages and benefits has also changed (Freeman, 1986; Mitchell,
1985), there
is
substantial evidence that, on the above range of issues, the negotiations
involves a more continuous, multilateral decision-making process that
we have termed
"administrative bargaining."
As
parties
expand the scope of
issues that they are willing to address via
administrative bargaining, they quickly learn that a joint administrative responsibility
10
for a given program area docs not
mean
that they will only face easy, consensus
Rather, fundamental disagreements will periodically emerge regarding
decisions.
program specifics and even broad
goals.
We
feel that
such conflicts are inevitable in
any mixed-motive relationships. As such, the clear implication for practitioners
is
to
anticipate that conflict will emerge in course of joint initiatives.
At the
engage
level of interpersonal interaction,
in clear
important
becomes important
to be able to
confrontations without engendering defensiveness, as well as to engage
and other communications
in active listening
it is
it
to
Equally, at an institutional level,
skills.
ensure that formal and informal mechanisms for dispute resolution
exist side-by-side with the joint administrative structures.
we would
Ultimately,
hypothesize that legitimizing competing interests would lead to stronger programs,
even though the administration might be more complex.
Because administrative bargaining involves a more continuous
there are a
number of
aspects of bargaining strategy that stand in contrast with the
strategies associated with periodic collective bargaining.
impasse threats, and other forms of leverage become
make
possible to
are not written
set of interactions,
a series of small (or "nickel
down — without
First, the
much more
nature of deadlines,
subtle.
Second,
it is
and dime") agreements — many of which
fully assessing the
sum
agreements. Third,
total of the
highly effective innovations do not necessarily diffuse or become institutionalized.
Finally, the result of
more continuous administrative bargaining
is
that
new channels
of communications and decision making are established.
The implications
course,
is
relations.
that
it is
for practitioners involved in
relations, of
periodically necessary to step back and assess the administrative
In this regard,
we have found
critical to assess current status
collective bargaining
innovations, which
more continuous
is
may
off-site strategic
planning sessions are often
and explore redirection. Equally, we have found that
a particularly
valuable forum for codifying successful
suggest a strong interdependency between the
more informal
and continuous administrative bargaining and the more formal, periodic collective
bargaining.
Still,
there are unanswered questions regarding the power implications of
11
side-by-side administrative bargaining and collective bargaining. For example, are
union leaders constrained from distributive tactics because of their administrative
responsibilities or
is
management more vulnerable
to distributive tactics (such as
holding joint programs hostage) or are both limits present?
Often, the interests of various stakeholders within labor (such as officers,
appointees, stewards, skilled trades,
distinctions between line production
etc.)
and within management (especially
management and
staff)
become more sharply
distinguished in the course of administrative bargaining. Equally,
new stakeholders
(such as outside customers, outside suppliers and communities) take on active roles.
The
result
is
greater intraorganizational tensions and a more multi-lateral form of
bargaining.
To some
extent, parties have responded by
making the negotiations among
these
multiple parties more explicit. For example, production operations that are dependent
on one another may refer
to
each other as internal suppliers and internal customers as
they bargain over each other's quality, schedule and cost requirements. As well,
outside stakeholders
structures.
direct
Still,
may
new
be given formal "seats at the table" for certain administrative
there are deep questions to be addressed regarding
mechanisms for
and indirect participation by various labor and management stakeholders
in
administrative bargaining. Specifically, in what ways does ongoing administrative
bargaining reinforce or undercut union democracy and the managerial chain of
command?
Ultimately, the challenges of administrative bargaining operate both at the level
of interpersonal interaction and at an institutional level.
At the interpersonal
the initial challenges concern building a capacity to bargain over
is,
establishing joint administrative initiatives requires a
how
level,
to bargain.
That
form of negotiations over the
norms for interaction associated with administrative bargaining. At an institutional
level, labor
and management leaders are really engaged
in a process of crafting
governance (Savoie and Cutcher-Gershenfeld, 1989), whereby the parties are
constructing
new
institutional arrangements within
12
which they
will then operate.
Implications for Theory
If,
as
we would argue,
industrial relations in the United States has entered a
period where there are deep changes occurring in the patterns of interaction,
we must
consider what theories will best aid us in understanding the changes. In this regard,
we have found
that
many
of the principles derived from a behavioral perspective on
negotiations have proven particularly powerful.
However, we have found ourselves
extending the Walton and McKersie (1965) framework beyond the relatively stable,
periodic, and bilateral processes of collective bargaining.
Indeed,
negotiations,
we examine
if
we
each dimension.
sec that recent events surface
As
a field,
1.
How
2.
How
these extremes that have
It is
them here by way of
others.
the four dimensions of the 1965 behavioral theory of labor
illustration
we
feel that
some of the most extreme aspects of
mapped our research agenda. We
list
and by way of invitation for further research by
we need
to
know more
about:
distributive dynamics can deteriorate in the course of necessity
bargaining and destroy a labor-management relationship.
integrative dynamics can expand via administrative bargaining and
a labor-management relationship.
transform
3.
4.
How intraorganizational dilemmas are becoming more sharply articulated
and how they now exist side-by-side with an emerging set of multilateral
dilemmas associated with parties in addition to labor and management.
How
attitudinal structuring becomes bargaining over the very
norms and
assumptions that frame negotiations.
Deeper understanding along these dimensions promises
to fully
embed current
alternative dispute resolution initiatives within a broader conception of the changing
nature of U.S. labor-management relations. Further, the analysis promises deepen and
extend our understanding of the nature and dynamics of a transformation
industrial relations.
assist
unions
in facing
in
Finally,
it is
via such an analysis that
we may
facing fundamental institutional questions and
profound competitive pressures.
13
how
in U.S.
better learn
to assist
how
to
employers
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Cutchcr-Gcrshenfeld,
Joel.
"Tracing a Transformation in Industrial Relations:
The Case of Xerox Corporation and
the
Amalgamated Clothing and Textile
Workers Union." Washington,
U.S.
Department of Labor
Freeman, Richard.
"In Search of
D.C.:
Union Wage Concessions
in
(1988).
Standard Data
Sets" in
Industrial Relations Vol. 25, No. 4 (Spring 1986).
.
Kochan, Thomas, Harry Katz, and Robert McKersie. The Transformation of American
Industrial Relations
New
.
Mitchell, Daniel. "Shifting
York: Basic Books (1986).
Norms
in
Wage
Setting."
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Savoie, Ernest and Joel Cutcher-Gershenfeld. "Reflections on the Governance of
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Ithaca, N.Y.:
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Walton, Richard and Robert McKersie.
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A
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Hill (1965).
14
.
Table
1
MANAGEMENT AND THE POWER EQUATION
Date Due
^S
a
UPR 04
1390
FEB 07
1992
Lib-26-67
Mil
3
TDflO
LIBRARIES DIIPL
I
D0S70MMS
M